Business Strategy in the Global Economy

(MN30409)

Session 4 Globalization and

the Determinants of Global
Competitiveness

Bruno Oliveira
B.Oliveira@bath.ac.uk

Group Work
General Description
Requires research about global trends

Objective
Develop the skills to understand global trends and their relation to
global strategy .

Submission Date
Submitted electronically (through Moodle) until 23.55 GMT, on the
30th of April 2014.
This date was selected with the purpose of allowing you to have your
work and the feedback I will provide fresh in your mind for the exam.
This will allow you to better understand and remember the key
concepts and theories within the course.

Group Work
Choose ONE of the following companies
Dropbox, Microsoft, Netflix, Pinterest, Tesla Motors or Uber .

Group Work
Submission Requirements
You have to submit 2 Files: a WORD FILE (.doc or .docx) AND
a PDF file
The word limit for this assignment is 2500 words excluding
references. NO 10% buffer 2500 words absolute limit. NO
Appendices are accepted!
If you use tables with text, they cannot be added as an image. They
have to have readable text and its content counts towards the word
limit. There are no exceptions!

Plagiarism
Zero tolerance. Every document will be automatically analysed
through powerful software.

Group Work Structure & Content

4 Key Sections Need to be Included:
Brief reflection on the companys current global strategy
Briefly analyse the companys current global strategy
Free to use the approach you find more relevant. Using the 4
dimensions of global strategy is just one possibility.
Identification of key global trends (e.g. economic, political,
social, technological, etc)
Be creative and think outside the box
You have to follow a logical approach and explain clearly how you
arrived at your list of trends
Support some of the research with references

Group Work Structure & Content

Reflections of the opportunities and threats that might emerge
due to the trends identified
Make relevant connections between the trends identified and the
company.
What are the opportunities created and what about the challenges?
Think from different angles to allow a deep understanding of the
different effects a trend might have
Summary of key opportunities and threats you identified (5-10).
Recommendations on how the company should deal with the
emerging trends
Recommend how the company can take advantage of opportunities
and at the same time protect against threats.
Minimum of 3 recommendations, which should be supported with
convincing arguments. More than 7 recommendations would
normally be seen as too much.

Assessment Criteria

Report Overall Structure and Logic

The report shows a clear structure and all the different pieces fit
together. There is a good flow and a good relationship between the
ideas conveyed in the different sections. For example, the
arguments used to identify key trends are then followed up to
discuss the opportunities and threats generated.
The process followed throughout your report (e.g. identify trends,
opportunities/threats, etc) is clearly explained.

Clarity of writing

Assessment Criteria

Understanding of key concepts/theories & ability to apply them

in a practical situation
The key concepts/theories/frameworks/models approached in the
course are used throughout the project.
You are able to choose the concepts that best fit your analysis and it
is clearly explained why they are used in your project.
You are able to clearly apply the concepts and theories to the
practical case you are analysing. In doing so, you show a clear
understanding of how those concepts and theories apply in practice.
Use of correct terminology

Assessment Criteria
Argumentation and Quality of Discussion
Depth of coverage of key issues - You have addressed the key
issues outlined in the section Group Work Structure and Content.
The discussion undertaken demonstrates extensive research and
deep reflection of the key issues identified.
Ability to consider issues from different angles and to discuss
how a different perspective can have different implications.
Ability to use relevant references or practical examples to
support critical statements and key issues.
The decisions you take are supported with strong and clear
arguments. For example, the choice of key trends, key
opportunities, final recommendations need to be well argued.

Assessment Criteria
Ability to draw well-reasoned and well-supported
reccomendations
You are able to synthesise your work in a logical way and your final
recommendations are well aligned with the argument you built
throughout the project.
You are able to explain clearly why you chose to focus on certain
opportunities/threats instead of others.
You show a good ability to reflect on how your recommendations
impact on the future decisions and strategy of the company.
Originality and novel thinking
Ability to come up with novel interpretations and suggestions,
showing deep reflection of the subject under consideration.

Example of Feedback Form Used

11

Example of Final Feedback Highest

Mark
This is an outstanding piece of work. Congratulations!

The work is very well structured and written. The arguments are very solid and
robust, showing you did an extensive research about the company and the global
environment. Furthermore, you were able to synthesise all the information and focus
on the key points and recommendations. The trends and suggestions you made
were very interesting, logically argued and showed careful thought and consideration.
The use of figures helped to convey your ideas in a compelling way and showed a
good level of novel thinking and originality. Very well done!

In terms of areas for improvement, the first section could have been better structured
and organised. The last section could have reflected a bit more on the implications of
your recommendations for Amazons future.

I felt inspired reading your work, which is not an easy achievement! Congratulations
again.

12

Example of Final Feedback Lowest Mark

This is a reasonable piece of work. You did some effort to integrate some lecture
contents within your report but unfortunately the work has several shortcomings that
were mentioned throughout.

The structure of the work could have been improved and the writing could have
been clearer and more convincing. Your approach was too general and vague and
did not identify specific issues. Furthermore your recommendations seemed too
narrow and too similar.

Overall, the quality of discussion lacked depth and there were little references to
support your analysis and arguments. The work would also have been improved if
you were able to analyse the key issues from different angles. This would allow you
to be more original in the presentation of your ideas.

13

Update Course Structure

Key Sessions for Group Work Sessions 1 to 7
S1 (3rd Feb): Introduction Business Strategy in the
Global Economy
S2 (10th Feb): Global Strategy (3h Session)
S3 (17th Feb): Institutional/cultural considerations (3h
Session)
S4 (24th Feb): Globalisation & Determinants of Global
Competitiveness
+ Assessment Info
S5 (3rd Mar): Integrating internal and external
resources Open
Innovation & Open
Strategy
S6 (10th Mar): International Expansion I Entry Modes
S7 (17th Mar): International Expansion II Global M&As
S8 (24th Mar): No Session Watch Video & Work on

Office Hours and Availability

Office Hours
Normally on Tuesdays between 2-4pm (before class).
Also available after class (from 18.05). Please book in
advance.
Available by email at b.oliveira@bath.ac.uk
Important info below regarding availability
24th Feb to 20th March Good availability to meet in
person and generally able to respond quick to emails.
22nd March to 5th April Abroad on conference and
Easter break. Not possible to meet in person. Available
for emails but might take a bit longer than usual to
respond while abroad.
6th to 19th April Research activities abroad. Better
availability to respond to emails. If really necessary
might set up a skype call.

Learning Outcomes for

Today

1.
1. Understand
Understand what
what is
is globalisation
globalisation and
and be
be
capable
capable of
of discussing
discussing the
the arguments
arguments in
in
favour
favour and
and against
against it
it
2.
2. Be
Be able
able to
to understand
understand the
the point
point of
of view
view of
of
different
different stakeholders
stakeholders on
on globalisation
globalisation
3.
3. Comprehend
Comprehend why
why being
being knowledgeable
knowledgeable about
about
globalization
globalization is
is important
important for
for managers
managers involved
involved in
in
global
global strategy.
strategy.
4.
4. Understand
Understand the
the key
key business
business benefits
benefits of
of
globalisation
globalisation
5.
5. Grasp
Grasp the
the key
key business
business challenges
challenges associated
associated with
with
globalisation
globalisation

Example Cultural/Institutional
Impact on Business
Discussion Baidu: The Google of
China

17

Example Cultural/Institutional Impact on Business

18
http://www.bloomberg.com/video/the-baidu-billionaire-inside-the-google-of-chinauweP_4bfT6KFyNkvCFq5Hw.html

Example Cultural/Institutional Impact on Business

19
https://www.youtube.com/watch?v=PQIZpi0mKnM

Impact of Cultural Differences on

Business Situations
- Managing joint ventures
- Negotiating internationally
- Managing relationships with
suppliers/customers
- Dealing with host country governments
- Motivating the local work force

Globalisation

Globalization: The process by which people, products,

information, and money can move freely across
borders.
Globalizing: The phenomenon of the transition of

Emergence of Globalisation
Decline in barriers to the free flow of goods, services
and capital. Agreements between countries within the
World Trade Organization (WTO) to lower the tariffs
charged on the trade of goods, services and capital.
Decline in barriers toward Foreign Direct Investment
(FDI) allowing foreign firms to invest and own resources.

Emergence of Globalisation
Major Technological Changes. Major advances in
communication, information processing and
transportation technology. For example, between 1930
and 1990 the price of 3-minute phone call between New
York and London fell from $244.65 to $3.32. Today, using
VOIP, it can be 0!

Global Trends Business Communications

Telepresence and the Future of Business?

https://www.youtube.com/watch?v=18zD3_wkWqM

Globalization Debate
Summit

Arguments Pro
Globalisation

Creates overall wealth for all nations because specialization increases

trade.
Reduces inflation because of cost efficiencies
Benefits customers because of price reduction owing to cost
efficiencies
Better allocation of natural, financial and human resources
Reduces corruption because of free market trade27

Arguments Against
Globalisation

Imposes massive strain on labour force both in developed countries

(job destruction) and developing countries (e.g. child labour)
Standardises customer tastes and reduce diversity
Induces concentration of power in a few global corporations
Introduce a jungle leading to the domination of the
strongest multinational
Harms the environment because of unrestrained exploitation
of natural resources such as forests
28
Reduces capacity for nations to protect their national
interests, cultures and values

Example An Argument Against Globalisation

29
https://www.youtube.com/watch?v=uWSxzjyMNpU

Globalisation at the Firm Level

30

Why do Firms Globalize

MARKETS

RESOURCES

To capture new
markets

COMPETITIVENESS

Natural resources

Economies of scale

Offshoring/Offsourcing

Costs

Knowledge

Networks

Security of supply

Risk-spreading

Increase Size (V): Capture market opportunities

Customer Value

CV
Price

Get Access to resources and procurement(S)

PROFIT
Costs

Increase Size benefit from Economies of Scale (C)

Get access to low cost labor and infrastructure

(C)
Get access
to knowledge (CV and C)

Internal Costs
C
Supplies (S)
Volume (V)

Serve global customers (CV)

Reduce risks through geographical diversification

Business Benefits of
Globalisation
COST BENEFITS:
Economies of Scale (e.g product/standardization)
Increased bargaining power over suppliers
Ability to organize global business system that locates activities in
the most advantageous places
TIMING BENEFITS
Coordinated Approach to product launching in early stage of
product lifecycle. Optimal volume obtained quicker.
Ability to work around the clock. Example: Many software
companies, including IBM and Microsoft, now use Indian engineers
to perform test functions on software designed in the United States.
32

Example Apple Launched the iPad in several

countries simultaneously

33

Business Benefits of
Globalisation
LEARNING BENEFITS:
Coordinated transfer of information, best practice and people
across subsidiaries
For example, Unilever Thailand found an innovative way to produce
and market ice-creams this was transferred to all other Asian
locations.
ARBITRAGE BENEFITS
Use resources in one country for the benefit of other countries.
Can allow company to play the global chess game engage in
price war in one country to weaken important competitor in its
dominant market. Example: Goodyear vs Michelin
Tax & Legal Arbitrage. Example: In Europe, Ebay has their tax
jurisdiction in Luxembourg; Apple has a complex network of
subsidiaries across to world to save money in taxes
(see link below).
34

A CLASSIC EXAMPLE:
OTIS MULTINATIONAL CONFIGURATION

OTIS UK
Design

Production

Marketing

OTIS GERMANY
Service

Compete against UK and

multinational competitors

Design

Production

Marketing

Service

Compete against German

and multinational
competitors

for the UK market

for the German market

OTIS FRANCE
Design
Design

Production
Production

Marketing
Marketing

OTIS ITALY
Service
Service

Design
Design

Production
Production

Marketing
Marketing

Compete against French

and multinational
competitors

Compete against Italian

and multinational
competitors

for the French market

for the Italian Market

Service
Service

A CLASSIC EXAMPLE:
OTIS MULTINATIONAL CONFIGURATION

OTIS UK

OTIS GERMANY

Design

Design
Production
Production

Marketing
Marketing

Production
Production

Service
Service
Marketing
Marketing

Service
Service

OTIS
EUROPE
Design
Design
Production
Production

Production
Production

Marketing
Marketing

OTIS FRANCE

Production
Production

Marketing
Marketing

Service
Service

OTIS ITALY

HISTORICAL EVOLUTION OF GLOBALISATION

Business Challenges of
Globalisation

38

Business Challenges of
CULTURAL
FACTORS
Globalisation
Need to adapt to local customs and traditions: Product
standardization is not effective in this case and it is more complex
to manage the global activities.
For example, tastes in food, social interactions in sales negotiations,
attitude toward hygiene, cosmetics or gifts still vary considerable
between cultures.
COMMERCIAL FACTORS: DISTRIBUTION, CUSTOMIZATION,
RESPONSIVENESS
Distribution networks and practices may differ significantly
from country to country. Ways of managing the network, motivating
dealers and distributors can vary. Example: Pharmaceutical
industry- Marketing and distribution of medicine vary for different
countries (e.g. Doctors selling directly, free distribution, drug stores,
etc.)
Responsiveness to customer demand and need to offer
customised products/services are a challenge 39
because they
prevent standardization; For example, banking services to

Business Challenges of
Globalisation
TECHINCAL FACTORS
Differences in technical standards. Different standards on
electrical, civil, chemical or mechanical engineering prevent
economies of scale.
Need to adapt to local customs and traditions: Product
standardization is not effective in this case and it is more complex
to manage the global activities.
LEGAL FACTORS: Regulation and national security issues
Regulatory constrains imposed by governments. Regulation
on the free flow of people (work permits), cash, goods, data
(censorship).Governments can even nationalise foreign companies
and take control of key industries (e.g. oil)
Imposition of localization constrains. For example, some
countries only allow foreign direct investment if the company
develop value added in the country (e.g. manufacturing)
or if enters
40
in a partnership with local companies (e.g. joint ventures).

Summary of the Session

Globalisation means a greater integration between countries and it
has been fuelled by declining barriers to trade and major
technological advancements.
However, globalisation is a controversial topic that attracts
heated debates. There are a number of pro and against globalisation
arguments. The globalisation progress is not linear and is subject to
come backs it seems like the swing of a pendulum.
At the level of the firm, there are 4 key benefits: cost benefits,
timing benefits, learning benefits and arbitrage benefits .
Companies also face globalisation challenges that managers
need to consider when developing global strategy: cultural
differences, commercial factors (e.g. differences in network and
distribution systems), differences in technical standards, differences
in regulation and national security issues. systems